TREASURIES-Prices drop as U.S. data hint at recovery
* U.S. retail sales in April rise unexpectedly * Yields on 30-year bonds touch highest in more than 6 weeks * Speculation continues that Fed could be weighing exit By Luciana Lopez NEW YORK, May 13 (Reuters) - Prices for U.S. Treasuries slid early on Monday as data showed U.S. shoppers unexpectedly ramped up their buying last month, albeit slightly, pointing to underlying strength in the world's biggest economy. The Commerce Department said on Monday retail sales edged up 0.1 percent last month, instead of dropping 0.3 percent as expected by economists in a Reuters poll. "The overall tone of this report was quite encouraging as it suggests that U.S. consumers are continuing to successfully navigate against the steady fiscal headwinds," said Millan L. Mulraine, director of U.S. research and strategy at TD Securities in New York. "However, we believe that consumers will become more challenged to sustain this level of spending unless we see a more meaningful improvement in labor market activity." The benchmark 10-year note dropped 12/32 in price on Monday to yield 1.940 percent compared with 1.9 percent late on Friday. The 30-year bond slipped 27/32 in price to yield 3.140 percent compared with 3.096 percent late on Friday. "It's amazing how sentiment has just changed from 'we're going to a lot lower on yields' to right back to approaching contacts not too far from the highs of the year in yields," Justin Lederer, a Treasury strategist at Cantor Fitzgerald in New York. A continued climb in the dollar against the yen also helped erode Treasury prices overnight. The yen slumped further past 100 to the dollar after Group of Seven officials avoided censuring Japan over the country's massive monetary easing effort. That stimulus program has led to speculation that Japanese investors will seek yields elsewhere, seeking out riskier, higher-yielding assets for their money. In contrast, U.S. investors are pondering the possibility that the Federal Reserve could pare back or stop its asset-buying program as soon as this year. While the unemployment rate has slipped lower recently, at 7.5 percent the rate still remains a full point off the 6.5 percent Fed policymakers want to see. Recent economic data have proven mixed, as well, with some figures supporting a labor market recovery and others painting a more ambiguous picture. While a Wall Street Journal article over the weekend fueled speculation the Fed could be weighing exit strategies, some analysts were skeptical. "For the Fed to want to slow its bond purchases, it would need to see three back-to-back 200,000-plus gains in non farm payrolls," wrote Andrew Wilkinson, chief economic strategist at Miller Tabak & Co. LLC in New York, in a note to clients on Monday.
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